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pick apart my pricing!!

Discussion in 'Business Fundamentals' started by omegalandmgmnt, Oct 15, 2012.

  1. hey guys im a few years in business, have enough residential accts and a few small comm accounts.
    just looked at a 33k sqft spot and i was wonder if im lowballing, ive cleared my costs and made my margins.

    the lot is pretty easy, no islands, no loading docks, maybe 15 mintues of walkways
    132 parking spots
    2 inches - $ 400
    2.1 - 4 inches - $ 700
    4.1 - 6 inches - $ 900
    6.1 - 8 inches - $ 1100
    8.1 - 12 inches - $ 1400
    12 inches and up 1400 plus 100 an inch

    ive never salted this year and have no idea what im doing, ill prolly buy a airflo and wing it
    i have to learn some how. and theres no universal union cost schedual here!!!
    light salt/sand app - $ 102
    med salt/sand app - $ 137
    heavy salt/sand app - $ 165

    please help!! i dont want to low ball!! but i do want the account!!
    by the way im on long island where fuel is 4.39 a gallon!
    and ill be running a 04 dodge 2500 cummins 8 ft meyers, and a full size spreader
    1996 surburban 7 foot unimount
    and i have a skid steer and 6 wheel international if things get crazy

    THANKS!
    OMEGA INDUSTRIES
     
  2. alldayrj

    alldayrj PlowSite.com Addict
    Messages: 1,096

    Where on the island? Biggest problem i see id your sand salt schedule. Not quantitative enough.
     
  3. KYsnow

    KYsnow Member
    Messages: 74

    I think you are way,way to low on your salt pricing. To me the plowing is a pain in the rear but the salting is where the money is made.

    The plowing prices seems about right to me.

    Forget the light,med and heavy salt model and either charge by the pound or by a salt application. I'm trying to picture a 132 space parking lot in my mind and having trouble at this hour. I'd price it around $250-$300 if the size of the lot is what I'm picturing in my head. . If it ends up needing more salt charge for another 1/2 or full salting.
     
  4. SharpBlades

    SharpBlades Senior Member
    Messages: 366

    To me it sounds like the plow prices should be cut in half and salt prices tripled... But only you know your costs
     
  5. M.A.H.

    M.A.H. Junior Member
    Messages: 24

    I think your plow price is a little high 33k sqft is only about 3/4 acre. Should be able to knock it out in under an hr. with one truck, If it's easy. I also think the salt price is way low, I would lose the 3 different prices and just charge by the pound. 3/4 acre = roughly 600lbs. of salt.
     
  6. John143

    John143 Senior Member
    from NEPA PA
    Messages: 254

    I would have to agree on this. For the most part you make your money salting. I don't think you will land that account with them plow prices. :eek:
     
  7. Bossman 92

    Bossman 92 PlowSite.com Addict
    Messages: 1,771

    As stated already your salt prices are WAY to low. If you can get those prices to plow good for you, but they seem awful high.

    Not knocking you or anybody else for that matter, but I cant understand how any lot could accumulate 12" of snow before a plow drops.

    Good luck and keep us updated :salute:
     
  8. Longae29

    Longae29 PlowSite.com Addict
    Messages: 1,953

    Where do you guys think the salt price should be? On a 33k parking lot .....535lbs * $.20 = $107. Sure doesn't seem waywayway low to me. Id be happy to get $.20/lb.

    Plowing price on the other hand is waybtoo high
     
  9. DeereGuy

    DeereGuy Senior Member
    Messages: 346

    Hi Omega, You wrote or spec'ed salt/sand. Big difference from 100%salt and a 1 to 5 salt/ sand mix. If you have a stockpile from summer and sand is $10.or less per yd. You cant charge for straight salt and put down sand. Well, you can do anything but anything will eventually catch up with you. Be specific in your contract and price accordingly. So, what I'm saying is your number could be right depending on what you put down. Sure there are plenty of guys who cheat on salt and that can add up to a lot of money. It's up to you how you do business.

    I treat my customers fairly and they in turn sign my contracts yr after yr. I expect to make $150/hr in my truck while plowing. If not I'd better stay home and give it up or make a change because I'm not making it. This based on the avg snow inches and number of events, my overhead and cost of living in my area. You have to know those numbers to bid eventually. Treated salt is around $130/ton here. I could mix a 1-5 mix for around $30./ton or less with untreated salt. You also didn't state, that I noted, what the tolerance factor was. Are you plowing at 2" and every 3 " increment after for the whole storm or just once at the end. What are you doing exactly for the money they are paying you.. Put in on the contract and follow it if possible.

    When you do a commercial contract you include those numbers or intervals that you will plow. It changes the amount of time you have on the lot for plowing. That is how things should be figured. Based on time, with your goal to fill your schedule for the equipment you have.

    You should know how long it will take you to plow say 4" and knowing what you want to make per hour. Everyone has to start somewhere, I know, but make sure you put the specifications on paper of how and when and with what equipment the lot will be serviced. This will protect you and also you then know what the game plan is. I hope you work with contracts.

    You would be too high on the plowing portion here to survive. You would be low for straight salt. treated salt would be around $200. though probably $220 for up to 750lbs. Most of the time less could be spread but in the case of an Ice storm I spec out a higher number but only spread what is needed. Sometimes it depends on how clean the lot is plowed.

    As far as being a lowballer. You are not a low-baller if you can do the job per the agreement and make enough to survive another day. If you are out of business because your steering pump failed and your truck drove down into a ditch filled with scrap and ruined two tires then yes, you could be a lowballer...or was that a Redneck..
     
    Last edited: Oct 17, 2012
  10. DeereGuy

    DeereGuy Senior Member
    Messages: 346

    Omegalandmgt, Did we scare you away. Look, everyone has to start somewhere. We all did. Hey, I'm just speaking from my own learning curve and I have plenty to learn. Many guys fly by the seat of their pants so that's normal. Successful contractors on here are those that map it out, think ahead and make changes based on real numbers. Eventually you figure it out or you go out of business or perhaps skate along not ever making a living.

    Most on here aim to help, even if conversations sound short or disrespectful; me included for what it's worth, so don't take any offense. There is a lot of info on this site. Keep reading it. I know I do. Estimating will be more of a formula as you go on. It's hard to learn without making mistakes. The worse the mistake, the more I remember the lesson. To limit your mistakes at least take down all record of what was done during every storm. A notebook works but a phone with a notepad ap is better and searchable. You can print out hard copies of each storm with the narrative which may help later. My info copies directly to my laptop so I have a duplicate and access it for billing later on.

    I was contacted this summer by an account that I only spread salt for. Two years prior there was a slip and fall accident during a snow storm. The person waited to the last moment to sue. I used printed forms back then that I set up simply with info for each acct and event. I was able to give them times and amounts of salt spread, my opinion on conditions and everything. I gave them a copy. I have not heard back but it showed to me that I did my due diligence and that's all you can do. I was not named in that particular suit but it did wake me up.

    Normal things like how much snow fell in a given season and how many events you responded to help the bid process. Also, What Money was made and how it was spent. So expenses are a key figure to know and after you track for a while , what is your avg yearly overhead. Equipment, repair, consumables like salt and labor and Insurance, and what the tax man takes. After a few yrs you can go use that info to make better contract proposals. Should I say, contracts that make you money. So it is less important to know what the job should go for on avg, than what figure it will take for you to make a buck.

    My numbers and figures are different than yours. There is no right number. Just your number. If you operate leaner than the next guy you have the option to get the job. Or potentially get the job for what you have stated; the going rate in your area. Which when broken down is simply what your competition on avg. would need to get to make a nominal profit.

    All this with the assumption, that if you asked the question, than you do none of this.
     
  11. sdfgvsvcxfvsdfads
     
    Last edited: Oct 24, 2012
  12. thanks guys for all responses, ive been busy pouring a 165 foot retaining wall. trying to get my mind back in snow mode.
    been plowing driveways for 5-6 years and small comm lots
    this would be my first big one but to be honest i dont think im ready. i know i could do the work but i dont think i know enough about comm to jump in head first.
     
  13. heres how i look at it, i HATE shooting from the him, i love to know how much i made down to the penny, and i also love to know how to operate leaner then the next and charge the same amount to line my pockets and reinvest in my business.
    im 27 yrs old, ive been in business for myself for a few years legit, ive been tinkering for a while.
    im not looking to operate under the radar, im looking to build my businesses and live comfortably off of them...

    right now i think its best to stick to the driveways and inch into larger and larger comm properties.
    i think im too novice to accept a large contract and gamble to loose big and not be able to stay afloat.
    DEERGUY - i owe you a cup of coffee, i knew i was jumping in head first and you put things in perspective for me. i dont think i have enough experience on the business side to bid things properly, not to mention im sending quickbooks estimates as proposal forms which i think there has to be a better more professional way to present it to the potential customers. thanks for your help!
     
  14. Raymond S.

    Raymond S. Senior Member
    Messages: 513

    I wouldn't get scared away from this at all. 33k sq ft is cake. You said the lot was wide open, no loading docks. I do think you're plow prices are crazy and at that you wouldn't have to worry about it. I scanned through the posts above briefly and someone said figure an hour tops. Decide what you want for an hour of plowing and go for it. Something like this.

    plow $125
    salt $105

    You're in New York and as far as I know prices may be double out there. Around here you'd make money at these rates. In an hour you could plow and salt and walk away with $160 in your pocket. The reason I don't have tiered pricing for plowing is because it's a salted lot. Our lots don't get 8" of snow in them because we're on them when it's snowing. If you're uncomfortable put a blizzard clause at 6" and again at 10", whatever floats your boat. This sounds like the perfect lot to inch into commercial work for you though.
     
  15. i wouldnt put tiered pricing, but thats all i know, i wouldnt let the snow accumulate either, id go off the noaa website averages and charge for that but the customer might break my chops. maybe ill do a hourly charge for both and try and estimate both in a proposal and deff a minimum charge.... what is a blizzard clause?? does anyone have a decent proposal template? ive been trying to make my own but im not happy with it. thanks everyone!
     
  16. Raymond S.

    Raymond S. Senior Member
    Messages: 513

    Keep it simple. Standard per push rates. If you're worried you're going to get dumped on do a standard trigger-4", 4.1"-8",8"+ = blizzard. If this is going to be your first real commercial lot you'll be so geeked about making it perfect you won't let it get to 8" of snow. You can't use NOAA for snow. It varies too much, sometimes within a city block. IF you end up with a situation where tiered pricing is needed, measure how much snow is there at the time you plowed (not including drifts) and use that. Send me a PM with your email and I'll be happy to help you out with a standard template. Everyone here is right in saying you need to know your true costs of doing business. However, I've always believed that the PRICE is what the customer is willing to pay, period. Costs are used to determine margin, period. Just because you have minimal overhead doesn't mean you should be charging any less than the next guy. It just means you put more in your pocket at the end of the day. The only way you're going to know what your market will bear is if you get out there and start pricing. You can't learn anything sitting at home. Like they say..."The guy who tells you he never made a mistake, never did squat."
     
  17. DeereGuy

    DeereGuy Senior Member
    Messages: 346

    Omega, no big deal, I say jump in. If you don't have anything else really going but resi's that's the best case. you will learn and not get burnt and you wont get rich either. I've done them all. I am not getting rich. Except for the economy which does make an impact in pricing you can make it basic. Communication is the key with the Commercial small lots. You need to know what the client wants. If you can exceed the level of quality work but keep the price competitive that may get you another contract with him next year.

    Back to what he wants. Usually that is related to what he wants to spend and only he know what that is. If he is a new owner and has no experience that would complicate things and you may be able to make the going rate. I think you should aim to make a fair rate for your Comm lot. Soo.

    The easiest is per push. Only ever done that on one lot my self as the head office was in CA and that's how they did it over there. For that you ask how often they want it plowed. I would try to make it at least every 3 inches. I wrote in the contact that " a billable push could be done every 2" of accumulated Precipitation." for X amount. Let's take 3 inches and estimate how long it will take. If you have a straight blade it may take twice as long as a v. That's the efficiency level I talk about on other threads. If you have an 8ft pusher box or similar you could wipe that lot out in no time. Anyway with my 9 1/2 V I could bang that out 3"- 4" light snow in about 1 hr or less. for round figures say I need $160/ hr to make money. Start there. The trick is the trigger is a set amount. If you go to sleep and 6 inches piles up and it takes you 2.5 times or 2.5 hrs to do the lot one push you make the one push. You almost alway have a cleanup pass at the end and that usually will get you close to the max amt of pushes for any given storm because you may have less than the agreed amount to do a push but it need a cleanup. I alway just planned on it. 6" would be $480. That skid with a blade or box pusher could make money not a bucket.

    Dont use my figures they are not relevent to you. If you have general liability and equipment payments you have to allow for that naturally. I say take it on and learn. You will realize by the end of season how you did. It doesnt sound like you will lose with the equipment you have.

    By the inch I alway went less than 2", 2- less than 6" and every 6" increment after was the same. the first 2 was not much as many around here would just rather not have it done or pay so it has to be a no brainer. Less than 6 was the key amount. Every additional 6 in intervals was a lesser amount than the 0 to <6" amount.

    Where I am 0-less than 6" snow storms are very common. I have to go out and plow but its not bad so really my bread and butter. every addition 6" over a span of 24hrs is a lesser amt by say 15-20% as in a big snow 2 ft can rack up and the customer is overwhelmed with the cost when the bill comes. I'd rather get more for the smaller amts to make up and keep everyone happy. Generally in larger storms its hard to keep up so service is not as good either.

    ie 1 acre lot 2" minus = $180. 2-6"minus= $440 every add. 6" $350 just an example. You charge either 2"minus or the 2-6" not both. the 2-6"minus involves 2 pushes at least and prob a cleanup. You spec out in the contract when you plow by stating that due diligence will be given to plow the lot every 2-4 inches or something. The more you clean it per accum. the more it cost to you in time and them on the contract.

    Seasonal: You may know how many and how much snow you get. I take the 6" figure and multi by the event avg. so 14 for me. 2-6"minus avg 4" 14 x 4 =56 " I only average 44" so I have some extra cash in there. 14 events x the 6" price of 440. = $6160 for the season. whether you get 10" or 80" can I do the lot for the winter for that in a bad winter and not go belly up. Thats what I ask myself. It really end up depending on how lean your business runs. grab a calculator and play with the numbers. It is a learning curve is all I can say and I am always tweaking my own numbers as I make equipment purchases. I just signed a note for $112K today for a tractor pusher combo. My numbers are completely different than yesterday. It will take me a bit to figure it out.
     
  18. alldayrj

    alldayrj PlowSite.com Addict
    Messages: 1,096

    I would shoot it high omega. Whats worse, not putting in a bid (and not getting it) or putting it in high and not getting it? Heck, you might even get it! Unless this is some special circumstance with a hook up you don't want to screw up. I've been pleasantly surprised on some jobs that werent as bad as i thought. Its only your biggest til you get a bigger one
     
  19. DeereGuy

    DeereGuy Senior Member
    Messages: 346

    Sorry amended version here got logged out so edit ended

    Omega, no big deal, I say jump in. Below is my take, random thoughts cause my brain is baked at the moment and some of it is very general. Take what you can an leave the rest.

    If you don't have anything else really going but resi's that's the best case. You will learn and not get burnt if you figure it out. You wont get rich either probably. Once in a while I will bid a job that the owner has been over paying for years for the service given. One can do a great job and make both parties happy when money is easy. Not too many of those gigs anymore. A few extra moments or an extra pass the next morning never hurt me.

    I've done different proposal and will touch on the majors. I am not getting rich but I do make a wage and stay in business. Except for the economy which does make an impact in pricing you can make it basic. Communication is the key with the Commercial small lots. You need to know what the client wants. Sometimes they will only do it one way. It has taken 10 yrs to get all my accts to seasonal rates with monthly payments. I liked the per push because in heavy years I could make some good money. Seasonal rates are an insurance policy for both parties. If you can exceed the level quality of work but keep the price competitive that may get you another contract with him next year; and the next abutting lots too. Per inch pricing is how I did a lot of work early. I hate counting inches...

    If the client will tell you what he paid last year that is good info to know. And if will tell you why he is looking for someone else even better. You may find that you can't do the lot for even close to past contractors. I suggest you walk away.

    Back to what he wants. Usually that is related to what he wants to spend and only he know what that is. Sometimes I will offer to do work to match the spec of the job he was given in the past but was unhappy with but upsell him to a seasonal to make the lot look great and give me security on the money I will make for the winter. Maybe he doesn't know any options but only how it was priced prior. Selling a seasonal is easy for me now but you really have to justify that big number to the client. If you are unsure, it can be a hard sell and you can take a loss.

    The easiest is per push. Only ever done that on one lot myself as the head office was in CA and that's how they did it over there. Did it that way for 8 yrs til this year. It's now a seasonal. For all types you ask how often they want it plowed. I would try to make it at least every 3 inches. I have condos and they want the price down so its 3-4" for the seasonal. The per push contract I had, I wrote in the contract that " a billable push could be done every 2" of accumulated Precipitation." for X amount in dollars.

    You have to define push and usually it is a complete pass. Entrances get whatever it takes on my accts. Let's take 3 inches and estimate how long it will take. If you have a straight blade it may take twice as long as a v. That's the efficiency level we all talk about. If you have an 8ft pusher box or similar for your skid you could wipe that lot out in no time. Anyway with my 9 1/2 V I could bang that out 3"- 4" light snow in about 1 hr plus or minus. For round figures say I need $160/ hr to make money. Start there. The trick is the trigger amt. During night hrs the owners loved it when I got hung up and had a 12" push at 4am. That saved them dough during off hrs and they didnt care what kind of service they had. They did pay if I did do every 2" at night as well. Record times and what inches you did ea push. Snow can settle and look like half in the morning. By the push you are measuring fresh undisturbed snow in a few quick spots with a ruler right before a push.

    You almost alway have a cleanup pass at the end and that usually will get you close to the max amt of pushes for any given storm because you may have less than the agreed amount to do for the final push. I alway just planned on the final to make the number of pushes work for the snow storm amount. This allowed me to miss a push if I needed to late at night. Sometimes I needed sleep and the client made out as his outlet was not open and he didnt care.

    Dont use my exact figures they are not relevent to you. I say take it on and learn. You will realize by the end of season how you did. It doesnt sound like you will lose with the equipment you have.

    By the inch I alway went less than 2", 2- less than 6" and every 6" increment after was the same. the first 2 was not much money as many around here would just rather not have it done or pay so it has to be a no brainer. Less than 6 or 2"-6"minus was the key amount. Every additional 6 in intervals was a lesser cost than the 0 to <6" amount. With the wider intervals of 6" it really makes the billing easier. You charge for your actual physical measurement with a ruler and keep track as I said and put same in the contract. i.e. all billable plow operations determined by contractor named above with actual measured precip accumulations or something like that. The larger intervals i.e. 6" will get you thinking averages and it is easier to transition to one fixed seasonal price from there.

    Where I am 2"-less than 6" snow storms are very common. I have to go out and plow but its not bad so really my bread and butter. every addition 6" over a span of 24hrs is a lesser amt by say 15-20%. In a big snow 2 ft can rack up and the customer is overwhelmed with the cost when the bill comes. I'd rather get more for the smaller amts to make up and keep everyone happy. Generally in larger storms its hard to keep up so service is not as good either.

    ie 1 acre lot 2" minus = $180. 2-6"minus= $440 every add. 6" $350 just an example. You charge either 2"minus or the 2-6" not both. the 2-6"minus involves 2 pushes at least and prob a cleanup. You spec out in the contract when you plow by stating that due diligence will be given to plow the lot every 2-4 inches or something. The more you clean it per accum. the more it cost to you in time and them on the contract. I'm not sure if I'm clear here. sorry it's been a longgg day.

    Seasonal: You may know how many events and how much snow you get. I take the 6" figure and multi by the event avg. so 14 for me. 2-6"minus avg =4" 14 x 4" =56 " I only average 44" so I have some extra cash in there. It may add up to not be competitive. Too much... adjust.

    I think seasonals should cost a bit more than the avg winter as i don't have to abide by any constraints or count inches so I drop in and do partial and full cleanups often. I can provide the best service with seasonals and I incur some risk that I will not make my hrly wage if the snow falls more than the avge. If I am not maxed out with fast snow falls of 2" per hr etc than i can do a great job.

    If you can keep up with all your lots in a blizzard with prolonged 2" per hr snow then you should be making more per the clients need for no tolerance contracts or you need more contracts simply because you have time. Called scale economies. Max out and get paid for your resources if possible. Having a redundent or backup plan is nice and neccesary for some accts. The customer pays for peace of mind and the knowledge beforehand what the winter cost will be. Most business want to know what it will cost them.


    14 events x the 6" price of 440. = $6160 for the season. whether you get 10" or 80". You have to ask yourself, can I do the work for the winter for that amt in a bad winter and not go belly up. Thats what I ask myself. Were those the numbers I may have to rethink the 2-6" number I based the seasonal on and recalc to be more realistic. If salt is involved as a separate which is the only way I would do it then that may have impact depending on what can be made on a spreading operation. There is risk in a competitive market. You can reduce risk by charging more but staying competitive is the reality. It really end up depending on how lean your business runs. grab a calculator and play with the numbers.

    It is a learning curve is all I can say and I am always tweaking my own numbers as I make equipment purchases. I just signed a note today for a new tractor pusher combo. My numbers are completely different than yesterday. So I am starting over and am in the same situation as you are. I will figure it out over time and try not to be lazy about considering how to make my self more efficient whatever that takes. The numbers work on my purchase and having all seasonals I know what I will make before salt if everyone pays me. I aim to get paid. Salt I figure on 20 operations per acct or the 14 event number that I talked about above if I want to be conservative. I can get pretty close today to figure my winter gross receipts. I can plan and make adjustments. It will take me a bit to figure out the equipment. First thing I need to know with new equipment is how fast can I do a certain size lot. I have no idea at the moment. Hoping to double my time on lot like you have there. From there my goal is to fill my schedule with contract work for the equipment I have.

    Good luck. Take the jump. Sounds like you have the equipment. Equipment dealers will sometimes lease out or rent pushers for skids if you dont want to invest.
     
    Last edited: Oct 25, 2012
  20. thanks guys i put the bid in late last week, havnt herd anything yet, i stuck to my simmilar plow prices and raised my sanding prices